Background: Critical water supply
Currently, almost 30 percent of the world's population does not have simple and affordable access to clean water in their homes. More than 60 percent do not have sustainable sanitary facilities. This is referred to as "water stress" - from which more and more people are likely to suffer in the future. The reason is that population growth, urbanization, rising living standards, climate change and increased food and raw material production mean that by 2030, more than two-thirds of all people will be affected by water-related problems at some point in their lives.
Considering these facts, saving water is an undeniably important goal. In order to identify potential savings, the concept of a water footprint, which is analogous to the CO2 footprint, is helpful. It describes how much water is used to produce certain goods or perform certain services. For example, a pair of jeans accounts for 8,000 liters of water consumption, a kilo of cheese for 5,000 liters and a cup of coffee for 132 liters. .
The water footprint can also be measured for each individual, for cities or entire countries. Finally, the concept of "virtual water" makes it possible to describe the relationship within trading between water-intensive goods and water-stressed countries and regions. For example, according to estimates, half of the UK's water footprint is attributable to goods imported from water-stressed countries - the country's virtual water consumption is correspondingly high.
Promoting sustainable water management
"Sustainable water management" thus means that water is extracted, treated and used in such a way that it remains a recyclable resource and its quality does not deteriorate in the process. At the same time, it is necessary to ensure that individual households as well as industry and agriculture can be supplied with a sufficient amount of water. This means that so-called water stress as well as water footprint and virtual water consumption need to be reduced.
Given the complexity of the issue, it is clear that companies can act in many different ways to promote sustainable water management. On the other hand, investors face the challenge of ruling out conflicts with other sustainability goals. For example, should one invest in a company that desalinates seawater so that it can be used as drinking water, if problematic byproducts are created or a lot of energy is consumed in the process? Or in a water logistics company that reduces water stress but damages the climate and endangers biodiversity?
Avoiding conflicting goals
One way to resolve these conflicting goals is to evaluate sustainability criteria separately. For example, climate (CO2 emissions) and nature (biodiversity) risks usually entail irreversible consequences and should therefore be avoided altogether if possible. To further narrow the field of potential companies, we focus on two business areas when selecting companies for our sustainable thematic fund Future Waves: Access to clean drinking water and improvement of water quality.
Access to clean drinking water is provided both by the major water suppliers - such as American Water Co., Severn Trent PLC and American Water Works - and by companies providing infrastructure and related products, such as India's Wabag (a specialist in large water systems) or the US companies Advanced Drainage Systems (pipelines) and Badger Meter (smart metering systems). When it comes to improving water quality, for example, the technology- and innovation-driven area of freshwater purification technology is particularly interesting, with companies such as Evoqua (US), NX Filtration), Kurita Water (JPN), and Norway's CrayoNano, which purifies water using UV rays. The purification of wastewater, on the other hand, is usually handled by traditional waterworks and waste disposal companies such as France's Veolia. A third major sector is recycling and rationalization of water consumption. Examples include companies that improve water efficiency in industrial processes through analysis (the U.S. company Ecolab), offer water quality analysis (the U.S. company IDEXX Laboratory), or document water footprints in production processes (the British company Intertek and the French company Veritas).
Thus, sustainable water management can be achieved in a number of ways. There is a great need, the industry is expected to grow in the longer term and deliver valuable innovations on the way to a more climate-friendly, equitable future. And for investors, this could create real win-win situations.